Janco Developments Pty Ltd v Heworth Construction Pty Ltd

[2024] NSWSC 652

Supreme Court

New South Wales

Medium Neutral Citation:	Janco Developments Pty Ltd v Heworth Construction Pty Ltd [2024] NSWSC 652
Hearing dates:	12 April 2024; written submissions 8 and 13 May 2024
Decision date:	29 May 2024
Jurisdiction:	Equity - Technology and Construction List
Before:	Stevenson J
Decision:	Plaintiff to provide security for costs in the sum of $350,000
Catchwords:	COSTS – security for costs – where earlier orders for security were made – where third defendant seeks order that the proceedings be stayed until security amount is paid – where plaintiff seeks order vacating earlier orders for security – where no dispute that plaintiff should provide security – question of what would be reasonable quantum of security to provide from this point on to conclusion of a hearing
Legislation Cited:	Uniform Civil Procedure Rules 2005 (NSW)
Category:	Procedural rulings
Parties:	Janco Developments Pty Ltd (Plaintiff/Respondent) Heworth Construction Pty Ltd (First Defendant) HWC Contracting Pty Ltd (Second Defendant) Yuhui He (Third Defendant/Applicant) Vincenzo Mario Fabrizio (Fourth Defendant)
Representation:	Counsel: L Chan (Plaintiff/Respondent) P Folino-Gallo (Third Defendant/Applicant) Solicitors: Paradise Charnock O'Brien (Plaintiff/Respondent) Harrington Lawyers (Third Defendant/Applicant)
File Number(s):	2022/78599

JUDGMENT

1. The plaintiff, Janco Developments Pty Ltd, and the first defendant, Heworth Construction Pty Ltd, entered a Contract in December 2017 for the design and construction of a residential unit project in Bondi Junction.

2. Janco was the developer, and Heworth was the builder. The second defendant, HWC Contracting Pty Ltd, was a subcontractor engaged by Heworth to perform works for the project. The third defendant, Yuhui He, and the fourth defendant, Vincenzo Mario Fabrizio, were directors of Heworth. Mr Fabrizio was, at the same time, sole director of HWC.

3. Works for the project commenced in September 2018.

4. In April 2021, Janco purported to terminate the Contract on the grounds that Heworth had caused delays and defects to the project, and alleged that Heworth had engaged in misleading or deceptive conduct. Janco also alleged that Mr He and Mr Fabrizio, as directors of Janco, engaged in misleading or deceptive conduct and induced Janco to enter into the Contract.

5. On 26 May 2022, the first, third and fourth defendants filed a notice of motion seeking an order that Janco provide security for their costs in the amount of $377,175. By that time, the second defendant, HWC, had been placed into liquidation and was not an active party to the proceedings.

6. Searle Construction Lawyers, a firm based in Western Australia, were the solicitors for the first, third and fourth defendants. Harrington Lawyers, a firm based in Sydney, was engaged by Searle Construction Lawyers as town agents.

7. On 16 August 2022, the Court made orders, by consent, requiring Janco to pay $180,000 as security in three tranches, relevantly:

“3. [Janco] to provide security for [Heworth, Mr He, and Mr Fabrizio’s] costs of the proceedings as follows:

(a) in the amount of $60,000 within 7 days after the date these orders are made;

(b) in the amount of $60,000 within 7 days after service of [Heworth, Mr He, and Mr Fabrizio’s] evidence on [Janco]; and

(c) in the amount of $60,000 on the day prior to commencement of the final hearing of the proceedings.”

8. The security amounts were to be deposited:

“in an interest-bearing bank account in the joint names of [Janco’s] solicitors and [Heworth, Mr He, and Mr Fabrizio’s] solicitors”.

9. Janco’s solicitor wrote to Searle Construction Lawyers and Harrington Lawyers on 22 and 30 August 2022 requesting details for the purpose of opening the joint bank account. Neither Searle Construction Lawyers nor Harrington Lawyers responded to that correspondence.

10. In September 2022, Searle Construction Lawyers received instructions to cease acting for Heworth. Searle Construction Lawyers soon after received instructions to cease acting for Mr He and Mr Fabrizio. Harrington Lawyers filed notices ceasing to act for Heworth and Mr Fabrizio. Mr He ultimately engaged Harrington Lawyers as his solicitor in February 2023.

11. On 22 December 2023, some 16 months after the orders of 16 August 2022, Harrington Lawyers, on behalf of Mr He, enquired of Janco’s solicitor whether Janco had paid the first tranche of the security amount in accordance with the orders.

12. On 8 January 2024, Janco’s solicitor informed Harrington Lawyers that the first tranche of the security had not been paid.

13. To date, Janco has not paid the first tranche of the security amount, nor any amount, in compliance with the orders of 16 August 2022.

14. Now, by Notice of Motion filed 14 February 2024, Mr He seeks an order pursuant to the Uniform Civil Procedure Rules 2005 (NSW) r 42.21(1) that the proceedings be stayed until the security amount is paid.

15. Janco filed its own Notice of Motion on 16 March 2024 seeking to vacate the orders for security made on 16 August 2022, or to reduce the amount for security for Mr He’s costs in the proceedings.

16. The proceedings have progressed since August 2022. Heworth is now in liquidation and, like HWC, is not an active party to the proceedings. Mr Fabrizio is no longer legally represented and is not an active party to the proceedings. Janco has filed and served its lay and expert evidence. The defendants were due to file and serve its evidence in February 2024. Mr He has served some, but not all, of his lay and expert evidence.

17. Mr Folino-Gallo, who appeared for Mr He, submitted that Mr He only became aware of Janco’s non-compliance with the 16 August 2022 orders when called on to start preparing his lay and expert evidence. It seems that Mr He and Harrington Lawyers had both assumed that Searle Construction Lawyers had corresponded with Janco’s solicitors to set up the joint bank account. Mr He ceased preparation of evidence when he became aware of Janco’s failure to pay the first tranche of security. Mr Folino-Gallo submitted that Mr He should not be put to the cost of putting on its remaining evidence without security being paid. Mr He seeks to serve his additional lay and expert evidence once the applications before me are resolved.

18. On 12 April 2024, the motions were listed before me. There was no dispute that Janco should provide security for Mr He’s costs. The question before me was what reasonable quantum of security should be provided by Janco for Mr He’s costs from this point on to the conclusion of a hearing.

19. Ms Chan, who appeared for Janco, indicated that Janco would no longer press part of its case against Mr He, which, Ms Chan submitted, would reduce the costs to be incurred by Mr He in preparing evidence and defending these proceedings, and thus the security that should be provided.

20. On 16 April 2024, I made orders, by consent, requiring Janco to circulate a proposed Amended Technology and Construction List Statement as against Mr He, and identify which parts of the evidence it has served that it will rely on against Mr He.

21. Janco has now circulated its proposed Amended List Statement.

22. The proposed Amended List Statement does remove the claim that Mr He engaged in misleading or deceptive conduct. However, the proposed Amended List Statement now increases the scope of Janco’s claim against Mr He, as Janco now seeks to hold Mr He responsible for the following conduct:

1. that Mr Fabrizio induced a breach of contract by Heworth when, as the managing director of Heworth, he caused the entire Contract to be subcontracted to HWC; and

2. that Mr Fabrizio was a person involved in misleading or deceptive conduct of Heworth.

23. Mr He does not object to the filing of the proposed Amended List Statement, but does seek his costs thrown away by reason of the amendment.

24. It is hard to see, however, that the costs that Mr He is likely to incur will be any different than would have been the case before the proposed amendment.

25. The parties have prepared updated estimates of Mr He’s costs in light of the proposed Amended List Statement.

26. Janco’s solicitor, Mr Christopher Price, estimates that Mr He’s likely costs to the conclusion of a hearing will $94,750, reduced to $71,250 as assessed on a party/party basis. Mr Price states that his estimate accounts for:

1. drafting, filing, and serving an Amended List Response;

2. considering the plaintiff’s Reply to the Amended List Response;

3. preparing and settling further evidence;

4. considering plaintiff’s evidence in reply;

5. briefing counsel, preparing Court books, and general correspondence;

6. hearing preparation;

7. hearing (five day estimate).

27. Mr He’s solicitor, Mr George Hayek, estimates that Mr He’s likely costs to the conclusion of a hearing will be in the order of $535,800, reduced to $401,850 as assessed on a party/party basis. Mr Hayek states that his estimate accounts for the same tasks as Mr Price’s estimate, but, in addition, includes:

1. reviewing the plaintiff’s Amended List Statement;

2. considering any need for requests for further and better particulars, subpoenas to produce, or seeking discovery;

3. considering plaintiff’s additional evidence-in-chief, if any;

4. hearing (five to seven day estimate).

28. Mr Folino-Gallo submitted that Mr He will incur increased costs if leave is granted to file the proposed Amended List Statement, because he would be required to respond to and defend additional claims against him. It is said that further and better particulars and extensive discovery will be required for Mr He to meet the claims.

29. Ms Chan submitted that the new claims in the proposed Amended List Statement do not require Mr He to seek further and better particulars or discovery. Further, Ms Chan submitted that Mr He’s costs will be reduced because Janco no longer relies on certain reports and documents in evidence that related to its previous pleadings. It is said this removes the prospect that Mr He will need to obtain certain expert evidence.

30. It is not possible for me to form any firm view about what Mr He’s actual reasonable costs will be, other than that it will be in the range between the figures that the two solicitors have deposed to. The fact that both parties agree the hearing will take five days suggests that Mr Price has seriously underestimated Mr He’s likely costs.

31. It is necessary for the court to take a fairly broad-brush approach to these matters, and, here, it will involve taking into account the detailed evidence given by the two solicitors in question.

32. Overall, I conclude that the appropriate amount to order for security for costs is in the upper end of the range between the two solicitor’s figures.

33. Security for costs in the sum of $350,000 should be provided.

34. As to costs, the costs of the motions concerning security should be that party’s costs in the cause. Janco should pay Mr He’s costs thrown away by the proposed amendment.

35. The parties should confer and agree on the orders necessary to give effect to these reasons.

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Decision last updated: 29 May 2024